China VCs bullish on SaaS - AVCJ webinar

"Chinese businesses are quickly moving onto cloud. If you compare the cloud market, it’s $150 billion in the US and $20 billion in China," said Daisy Cai, a general partner and head of China at B Capital Group. "Of China’s $20 billion, 85% is still at the infrastructure-as-a-service level, which is more hardware and commodity-like. In the US, SaaS represents 65% of the cloud market.”

This view was endorsed by Yipin Ng, founding partner at Yunqi Partners, which focuses on enterprise services. He expects to see a steady stream of companies going public at valuations of $3-10 billion. At the same time, there is an emerging "SaaS plus" theme, whereby software follows specific application scenarios.

Yunqi has exposure to "SaaS + customization" as start-ups develop standardized products for the mass market while adding an element of customization to meet the needs of large customers.

There is also "SaaS + transaction," whereby companies operate marketplaces or distribution channels on the same platform as their software, and “SaaS + infrastructure," which is often referred to as artificial intelligence software or opensource software. Cloud database service provider PingCap fits into this category.

"China software isn't just about import replacement. These companies have global audiences," said Ng. "PingCap has customers in Southeast Asia, India, Japan, and the US. It speaks to the opportunity that the software in China is not just local, it can address an international market."

Helping Chinese start-ups go overseas is part of the B Capital thesis. "Because of the cost benefits and development speed, Chinese companies have a lot of advantages over their US or global peers," said Cai.

Source Code Capital is also seeing plenty of SaaS plus opportunities. Within the 2B segment, the firm focuses on software and robotic solutions, notably in the fields of industrial automation and smart manufacturing. Portfolio companies include Hai Robotics, where there is a SaaS component to a warehouse automation product.

"This kind of robot can increase any warehouse storage density by 100-200%, which increases the whole output by 3-4 times. And it has a very large addressable market," said Jireh Li, a managing director at Source Code.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Technology
• Early-stage
• China
• B Capital
• Yunqi Partners
• Source Code Capital
• AVCJ Events